First Circuit Rules in Favor of Trust for Public Land in Failed Conservation Attempt

In Kunelius v. Town of Stow, handed down today, the First Circuit sided with conservationists who tried and failed to save a large tract of certified "forest land" (as defined by Massachusetts law) in Stow, Massachusetts from development as a "co-housing" facility.

The tale is long and sordid, but essentially comes down to this. Although she knew that the Town had a right of first refusal (ROFR) for any negotiated sale of her property (that she had gotten certified as "forest land" in return for tax concessions), the property owner negotiated a contract with a cohousing developer from Washington state with a liquidated damages provision of $19,000. The Town, spurred by local activists who organized to oppose the sale and development, exercised its ROFR. The Town, in turn, acted in light of a promise by the Trust for Public Land to take assignment of the purchase and payment responsibilities. And the Trust for Public Land relied on possible town funding, fundraising, and some state preservation funds. But once the Trust took assignment, all the monies dried up, due to politics, bad luck, and some self-destructive fundraising techniques. The Trust wanted out, and expected only to pay $19,000. Meanwhile, the property owner no longer had the option of selling to the original developer, who had since found a site elsewhere. So she tried to hold the Trust to the entire purchase price.

The facts of the case made the Trust and its local representative look pretty darn bad. And the panel didn't have much sympathy for it, based on the opinion's tone. The property owner, in essence, made the public policy argument (in the panel's words) that "granting municipalities and nonprofits added leverage to disrupt transactions involving certified land" by allowing them to neatly take the position of the original developer in the assignment, and with it any favorable terms "would tilt the statutory structure too far toward the municipality and would therefore reduce the number of landowners willing to participate in the [forest certification] scheme." Nonetheless, the panel concluded that the liquidated damages provision was binding on the property owner--that she had to settle for the lower amount. This was only fair, they noted, because she knew all along that she was negotiating with the developer in the shadow of the Town's ROFR. Therefore, "[s]he may well have been able to negotiate terms that would have better protected her in the event that less reliable counterparties, such as the Town and the Trust, would become parties to this transaction."

So the Trust for Public Land escapes with little liability but a fair amount of egg on its face. The instant property owner will probably only be able to sell the land to someone willing to commit to keep it just the way it is now. And in the future, property owners participating in Massachusetts state conservation programs would do well to omit any liquidated damages provisions they don't really want to live with.

First Circuit Kicks out Challenge to LNG Facility

No substantive issue reached, just consternation at repetition of unripe claim

In Nulankeyutmonen Nkihtagmikon v. Impson, handed down today, the First Circuit rejected a challenge by a group of members of the the Passamaquoddy Tribe in Maine over a Bureau of Indian Affairs (BIA) decision to allow the lease of a plot of Passamaquoddy land for the construction and operation of a liquefied natural gas ("LNG") facility. The lease was approved by tribal authorities in May 2005. The BIA looked at the lease under the Indian Long-Term Leasing Act, 25 U.S.C. § 415, and rubber stamped it in a week--albeit only for the permitting phase, and subject to FERC approval. This FERC approval was to include NEPA review (though, given 2005 amendments to the Natural Gas Act, and subsequent FERC implementing regulations, the NN group had reason to doubt how rigorous this was going to be.)

NN filed suit in the District of Maine, challenging the BIA approval for failure to properly follow the requirements of NEPA, 42 U.S.C. §§ 4321-4327, the National Historic Preservation Act, 16 U.S.C. § 470 et seq., the Indian Leasing Act, and the APA, 5 U.S.C. §§ 701-706, by not conducting environmental and other reviews or providing opportunity for public comment. The BIA succeeded in getting the case dismissed for failure to exhaust administrative remedies, since NN had not exhausted the available administrative review at Interior.

What happened next is textbook How To Sink Your Own Case. As the panel describes it: "Back in the district court, NN preserved its administrative remedies, and then, instead of arguing any 'exception' excused its failure to exhaust, told the district court that this court had erred by imposing the exhaustion requirement in the first place." (This reminds me of a case that was before the Tenth Circuit the year I was clerking, Park Lake Resources v. USDA, 378 F.3d 1132 (10th Cir. 2004). In that case, a suit by a mining organization challenging a "research forest" designation that put it off limits to mining, also brought twice, the Tenth Circuit held: "our dismissal of the earlier action for lack of ripeness requires dismissal of this action as well. Plaintiffs can overcome the previous dismissal only by showing satisfaction of the conditions for ripeness set forth in [the prior suit]. Having failed to do so, Plaintiffs cannot proceed with their claim." Doh.) The district court said, no, you have not yet exhausted your remedies, no dice. NN appealed. The First Circuit, in today's opinion, repeated itself--forcefully.

So although, as an environmentalist, I may be sad that this LNG terminal in what is presumably very beautiful country has not yet been stopped, as a lawyer, I have to shake my head. When your panel has to remind you that "when our mandate issued, it established the law of the case," you haven't done your most basic homework, and should be sent home.

First Circuit Rules FERC Preempts State Power over Altering Coastlines for LNG Terminals

Explicit Bush-era extension of FERC authority to cut through state law impediments to energy development comes to industry's aid

In Weaver's Cove Energy v. Rhode Island Coastal Resources Management Council (CRMC), the First Circuit overturned two attempts by the CRMC to prevent dredging in a Rhode Island waterway (and a federal navigation channel) for ships delivering gas to a new liquified natural gas (LNG) terminal.

The case implicates the Natural Gas Act (NGA), 15 U.S.C. §§ 717-717z, and the Coastal Zone Management Act (CZMA), 16 U.S.C. §§ 1451-66.

A 2005 amendment to the NGA grants FERC "exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal." 15 U.S.C. § 717b(e)(1). (Weaver's Cove applied to FERC for a permit to build the LNG terminal at issue.) The exclusive FERC approval authority is limited only in areas in which states are granted rights, i.e. under the CZMA and two other federal statutes.

The CZMA gives states authority to create coastal management plans (CMPs) subject to NOAA approval. In Rhode Island, CMPs are administered by the Rhode Island CRMC. As the First Circuit panel explains, "an applicant for a federal permit wishing to undertake any activity the state [CMP] regulates must certify with the local agency that the proposed activity is consistent with the [CMP]." 16 U.S.C. § 1456(c)(3)(A). But "[o]nce an applicant submits its consistency certification, the state agency has six months either to concur with the certification or to object if it concludes that the proposed activity is inconsistent with the [CMP]." 16 U.S.C. § 1456(c)(3)(A). Otherwise, concurrence is presumed. This limitation is explicit; in the eyes of the panel, it is meant to prevent "one state [from] delay[ing] the federal approval process."

Rhode Island state law also requires, separately, that any party wishing to dredge Rhode Island navigable waters must obtain a so-called "Category B Assent" from the CRMC.

(It is worth noting that the Republican Congress in the second Bush term acted more than once to prevent states from delaying expansion of U.S. energy capabilities. For example, section 216 of the Federal Power Act (FPA), also added in 2005, gives FERC permitting authority for electric transmission lines in "national interest corridors" when state utility commissions have "withheld approval [of a permit application] for more than 1 year." 16 U.S.C. § 824p(b)(1)(C). This is currently the subject of heated litigation. See, e.g., Piedmont Environmental Council v. FERC (4th Cir., Feb. 2009); a related case is pending before the Ninth Circuit. The impetus for these changes was the impression that U.S. energy infrastructure was falling behind the times while myriad state authorities dragged their feet.)

In the instant case, Weaver's Cove received conditional FERC approval for its LNG facility, but needed CRMC to sign off. Specifically, the Rhode Island plan under the CZMA required them to acquire a letter from any "upland facility" accepting the fill dredged up from the shipping channel. CRMC maintains that Weaver's Cove's application, first submitted in 2004, is incomplete because it lacks such a letter. Weaver's Cove maintains that no such letter is needed because they were not putting the fill in any Rhode Island "upland facility," instead sending it out of state. Both sides dug in. CRMC maintains that the application is incomplete, and the six-month NGA limit on its consistency determination is therefore tolled. Weaver's Cove says that since the letter was not needed to comply with the CZMA, the incompleteness determination is invalid, and the six-month limit long past. CRMC has also not granted state-law Category B assent, which Weaver's Cove argues is preempted by the NGA and the dormant commerce clause anyway.

Weaver's Cove sued in federal court, seeking a declaratory judgment that CRMC's basis for saying the application was incomplete is invalid, and the consistency determination should therefore be deemed constructively granted under the NGA. Weaver's Cove also sought a determination that Category B assent was preempted by the NGA, or, in the alternative, unconstitutional under the dormant commerce clause.

The district court granted summary judgment to Weaver's Cove on both counts, and the First Circuit agrees. The panel ruled that "upland facility" only includes to facilities in Rhode Island based on the text of the regulation and of other complementary regulations; since Weaver's Cove plans to send the fill out of state, the CZMA requirement that they get such a letter does not apply. The panel also rejected, among other additional arguments, CRMC's sovereign-police-powers-esque argument that it had "an interest in confirming that material dredged from its coast is properly disposed, regardless of the ultimate location."

The panel accepted Weaver Cove's preemption argument "for the narrowest reason, that of conflict preemption." It ruled that "Category B Assent clearly conflicts with FERC's 'exclusive authority' [under the NGA] . . . to license the 'siting, construction, expansion, or operation' of LNG terminals" because it "both conflicts with and is an obstacle to the authority FERC has asserted in this case." The panel refused to affirm on the basis of express or field preemption, and did not reach the dormant commerce clause argument.

Finally, CRMC argued that its power over approving changes to the coastline were somehow saved from preemption by the federal Rivers and Harbor Act, under which the federal Coast Guard has authority over dredging activities. The panel paraphrased CRMC's argument as being that "[s]ince the Army Corps's approval process under the Rivers and Harbors Act does not preempt state licensing schemes, . . . the savings clause in the NGA must therefore protect Category B Assent." The panel was not persuaded by this savings-by-association idea, and turned down CRMC's final gambit.

In one sense, Weaver's Cove Energyv. Rhode Island CRMC is a victory for those who would like to see the balance of power tilted in favor of the feds in energy policy. The wider impact of the decision, however, should be limited by the explicit nature of the operative clause of the NGA.

[Ed.'s Note: My old co-clerk on the D.C. Circuit, Adam White of Baker Botts, was one of the attorneys for Weaver's Cove. I am therefore bursting with pride over his win. But I have tried not to let this influence my description of the case in any way.]

Embedded Federal Question Jurisdiction Found in Lobster Case

And Judge Selya's signature flair shows up on an opinion he didn't even author

Today, a panel of the US Court of Appeals for the First Circuit held, in Rhode Island Fisherman's Alliance v. Rhode Island Department of Environmental Management (DEM), that DEM regulations implementing the Atlantic Coastal Fisheries Cooperative Management Act, codified at 16 U.S.C. §§ 5101-5108, were proper despite their retroactive nature. The challenged regulations allocated lobster traps lobsterman in a certain area off the Rhode Island coast based on whether they had had a license to sink traps in that area in 2001-2003.

A preliminary question was whether the case had properly been removed to federal district court under federal question jurisdiction. Plaintiffs, a group of Rhode Island lobstermen, brought suit in state court. Defendants removed the case to federal court, and won summary judgment on the issue of federal question jurisdiction.

Plaintiffs' pleading mentioned only state law on its face. But their argument that DEM lacked the authority to issue retroactive regulations depended, the First Circuit panel explained, on the notion that the regulations were not "expressly required by federal law, regulation or court decision," which would have made their retroactivity kosher under the relevant Rhode Island law.

The panel ruled that a hypothetical "well pleaded" version of their complaint would therefore have included a federal question, because "it is not logically possible for the plaintiffs to prevail on this cause of action without affirmatively answering the embedded question of whether federal law, in the form of a fishery management plan promulgated under the [Atlantic States Marine Fisheries] Compact, 'expressly required' the use of retroactive control dates." The panel further held that the question involved--whether the regulation was required by federal law--was "actually disputed and substantial," and that ruling on this question would not "disturb[] any congressionally approved balance of federal and state judicial responsibilities." Thus, it met all three requirements of Grable & Sons Metal Products v. Darue Engineering and Manufacturing, 545 U.S. 308, 314 (2005).

The panel dispatched with the merits of the case quickly, affirming that various state law challenges to the regulations failed largely for the reasons set forth by the district court below.

In the end, the lobsters off the Rhode Island coast have a little more protection, and anyone who made it through the case (or this precis) has had a small Wright & Miller refresher. (And this writer, compliments of a panel that included Judge Selya, has learned the words "encincture," "exigible," "superrogatory," and "asseverational.")

The full text of the opinion can be found here. There is, as of yet, no news coverage of the opinion.